Buyers' Remorse

  • by April 13, 2010

Every year around this time the press begins to pump the marketplace for any hint of what the television upfront is going to look like from a pricing perspective. And every year around this time the networks come out with their standard positioning of demand being high. In fact, Les Moonves already said that CBS is going to be looking for double-digit percentage increases. We all seem to think that the worst of the economy is behind us. In fact, the scatter marketplace has been incredibly strong in 4Q and into 1Q, so it seems to make sense that come April/May, the market will be looking at another significant increase. But where is the tipping point?

From where I sit in the online video space, there's no doubt that more and more money is moving out of TV. In fact, I've had a number of meetings with senior TV buyers who have been asking for rationale to provide their clients in order to take advantage of dynamic opportunities coming from the digital landscape. The easiest video buying opportunities to date for clients to grasp have been Hulu and YouTube. While YouTube has continued to offer increasingly engaging ad units, Hulu's main concern from a buyer's perspective has been pricing. But why? Why is price and CPMs such an issue to a client on Hulu, when that client continues to swallow double-digit increases every year in the TV upfront? With the economy picking up steam, the scatter market will be stronger come the end of 2010 and into 2011.

One of the points I often hear from clients is, "We know TV works." But does it work no matter what the price? At some point, aren't they paying too much? A few years ago second- and third- tier cable networks saw an influx of money because the networks were pushing hard for price increases. That trend will continue, which will in turn push inventory levels to capacity and allow pricing to continue to rise accordingly. And just like that -- welcome back the old supply and demand discussion again.

In my opinion, 2010 could be the watershed year. I believe the TV upfront will be a strong one across every facet: broadcast, cable, and syndication. The recovering economy will push more dollars into the market, and clients will want to ensure that they get their money down in key programming and flights. However, that doesn't mean that the upfront will be like it was 15 years ago, when by the time NBC finished its upfront presentation they already had booked $5 billion worth of business. Clients will still approve their budgets the Friday before premiere week begins in September.

By the end of 2010, buyers and clients are going to sit down and discuss the video marketplace in earnest. Industry research will have another nine months to prove ROI in the digital video space, and clients will have grown comfortable knowing what response they'll get from key digital partners. Pricing will continue to come down as video inventory grows, and discussions about engaged audiences will hold more bearing. Producers of content will continue to develop distribution strategies -- and even the broadcast networks will realize there's more opportunity in the digital space.

My prediction is that by January of 2011, Jeff Zucker will be talking about digital half dollars for TV dollars, instead of the original quote he uttered a few years back about "trading analog dollars for digital pennies." And the digital vs. TV discourse will continue to accelerate. While the economy will have (hopefully) recovered by 2011, the increases the broadcast networks will command in the upfront will be flattened to single-digit numbers. The broadcast networks will soon be fighting for every dollar side-by-side with YouTube, Hulu, the digital video networks, and the rest of the video providers out there knocking on the door.

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